Last week Samsung launched its Music Hub streaming service in the U.S., limited initially to select Samsung Galaxy S III devices. Music Hub premium version ($9.99 monthly) includes: upload of owned music library and storage up to 100 GB with Scan & Match Cloud Locker; storefront and streaming access to 19+ million tracks (assets from mSpot acquisition partner 7digital); personalized/custom radio; and recommendation engine capabilities. The free version of Music Hub does not include free steaming, and limits users to storefront, storage (cloud for purchased music, with local store/offline listening) and web player capabilities. Samsung, like other OEMS, including Nokia outside of the U.S. with its free Nokia Music Mix Radio, and HTC via its acquisition of MOG, is focused on bolstering its services positioning, and enhancing the appeal of the Galaxy S III. However, the premium music streaming space in the U.S. market is a tough one to crack. While Samsung seeks differentiation in its combined music and radio streaming offer, the market for premium is competitive and still nascent, and free streaming radio is where it’s at right now.
According to The NPD Group Connected Intelligence Content Behavior Survey, more than half of digital music listeners (63 percent) are listening to free radio streaming services on any of a number of connected devices, compared to a much lower 2 and 6 percent listening via premium music and radio streaming, respectively. And, naturally, these same trends are extending to the smartphone: 28 percent of Android smartphone users accessed Pandora in June; while a much lesser 2 and 4 percent used Rhapsody and Spotify (premium) music services, respectively, according to NPD Connected Intelligence’s SmartMeter.
The service should be easier to discover, as the app will be pre-loaded on select Galaxy S III devices sold via the wireless carriers, and alternatively sold via Google Play and the Samsung App Store. And, it is free for the first month, which will give consumers an opportunity to “try before they buy,” which is critical to the purchase decision, which according to the Content Behavior Study is the preference of 59 percent of premium music subscribers.
Samsung also has the unique opportunity and capabilities to unify the music experience (device and services distribution) both in and out of the home. However, it is not clear if the TV will have a long term future as a music player: as smartphones and tablets continue to dominate, simple speaker accessories turn these into a superior (sound quality wise) solution to many TV sets. Case in point: according to the Content Behavior Survey, 26 percent of TV owners who don’t have access, expressed interest in accessing music services via their TV either built into the TV itself or through devices connected to the TV.
Bottom line, Samsung will face challenges in getting consumers on-board to premium music services, as the vast majority of consumers (86 percent) engaged in free just don’t see the value. To move the needle on premium, Samsung, and other premium players, must key into the needs of its target users, and convince them that there is more value in an uninterrupted (advertising-free), controlled, no time limits/caps and more music (broader catalog) experience vs. free propositions.